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Candidate gossip spreads, real issues begin to rear their heads…

The self-nomination of Jeff Sachs into the ‘race’ has certainly livened things up. David Bosco reports that Bank staff don’t think much of Sachs – which may be a good or a bad thing depending on your opinion of Bank staff. Sachs has shown he has some political nous by highlighting one central weakness of the Bank under Zoellick – the desire to prioritise everything. It always looked suspiciously more like empire building than strategic direction. Stephen Grenville goes further, arguing that “Zoellick seemed to revel in spreading his influence widely.”

Strategic direction is obviously an important attribute for the next Bank head, but Felix Salmon points to the diplomatic and political skills needed to broker compromise across the Bank’s constituencies, which he argues rules out Jeff Sachs.

“Sachs, by contrast, is angry; life’s natural campaigners. That’s great when you’re hanging out with Bono, or even Bill Gates. But it’s less likely to get you very far when you’re trying to persuade the Nigerian president to revolutionize his domestic policy.”

Stephen Foley of the Independent hinted where Sachs may really be aiming – the Bank’s chief economist position, currently held by Justin Lin.

A dose of humility would also serve one of the world’s most self-confident (some may say arrogant) institutions well. Two putative candidates displayed different versions of this attribute. Bangladeshi microfinancier Muhammad Yunus ruled himself out, despite having the backing of his government and the respect of at least one US official. “I have been a regular critic of the World Bank for its policies and programs,” he said in a statement. He also revealed that he had been sounded out for the job in 1995 by Bill Clinton – that the assumption that the US will always back one fo their own may not be as rock solid as often assumed. Meanwhile Indian minister Jairam Ramesh – also on the bookmakers’ lists of possible long-shot candidates – when asked if he was interested, said instead that “there was no one better” than Indian planning commission deputy chair Montek Singh Ahluwalia.

But can anyone really argue that really understanding the particular problems of developing countries is the most important attribute, and that it’s kinda hard to get it if you haven’t spent much of your career working in – or for – one of those countries? Not something that appears too frequently on the CVs of many of the candidates currently being discussed at the White House…

Bank staff have never trusted an outsider. No big bureaucracy likes external impositions or questions from outsiders. The permanent civil service inside the world bank is no different .

Understanding the peculiar problems of developing countries—– despite studying developing countries everyday, world bank staff have gotten it wrong most of the time; especially the big transformations in the world. Makes one wonder if a long career of studying developing countries in splendid isolation and insularity is a virtue.

“Robert McNamara and James Wolfensohn has no background in development. They repositioned the Bank enormously. Many would say that what they left in terms of process discipline and fix on poverty were, respectively, what they ‘baked in’ to the Bank’s DNA. Neither has spent their lives in ‘splendid isolation’.”

Mr. McNamara introduced process discipline to churn out projects; the development equivalent of “body counts”. Laid the basis for HIPC debt relief.

However, Bob and Jim relative to the average bank permanent civil service bureaucrat were less insular and had to survive in more competitive environments.

Jag and Jesse are a bit off-target. Robert McNamara and James Wolfensohn has no background in development. They repositioned the Bank enormously. Many would say that what they left in terms of process discipline and fix on poverty were, respectively, what they ‘baked in’ to the Bank’s DNA. Neither has spent their lives in ‘splendid isolation’. Not that Jeff Sachs’ TV and speaking engagements have hidden him in a dark corner in the years since he promoted structural adjustment in Poland and Russia.

“In July 1999, the Provost of Harvard University appointed a Faculty Task Force to make recommendations regarding the future role of HIID and its relationship to the University. The Task Force review was prompted by increased development-related activity at the University and the significant growth of HIID in recent years. The Task Force conducted a thorough review of the status of HIID and considered a number of proposals regarding its future role and relationship to the University. These proposals included maintaining HIID as an allied institution, establishing HIID as an autonomous institution linked informally with Harvard, distributing HIID’s functions to faculties within the University while dissolving it as a separate entity, and closing HIID and discontinuing its functions.

In January 2000, after months of deliberation, the Task Force unanimously recommended that HIID should be dissolved and that its functions should be integrated into schools within the University. The intent of the Task Force’s decision was to institutionalize the development work that has historically been carried out by HIID, linking it more closely with the teaching and research of Harvard University. The decision acknowledged the valuable international development activities pursued by HIID and reinforced Harvard University’s commitment to development work.”

A paper produced when Sachs was in charge has been removed from the website of USAID, who paid for it.

In the words of former World Bank economist David Ellerman, who frequently collided with Sachs’s work in Slovenia and has followed him intently ever since, “Only the mixture of American triumphalism and the academic arrogance of neoclassical economics could produce such a lethal dose of gall.”

The reality is that the role of World Bank President is a cross between CEO of a Fortune 500 Company (The World Bank would rank about 350) and President of a medium size country with special global responsibilities in support of economic growth. Of the last five World Bank Presidents: Conable was too much of a Politician (especially a US politician); Preston was too much of a Wall Street banker; Wolfowitz was Wolfowitz (too much of an ideologue along with allowing personal issues to drive that ideology); and Zoellick was essentially a civil servant. McNamara and Wolfensohn are the only two who have combined the roles reasonably effectively – though like most people they had their respective faults.

The World Bank is NOT USAID or DfID or any other bilateral aid agency or charity. It is NOT a humanitarian or emergency relief agency. It is NOT Bank of America or Citibank or Credit Suisse. It is NOT the Federal Reserve or the bank of England or the European Central Bank. It has a unique role and a unique business model that complements all of these. By borrowing money cheaply and lending money cheaply and then plowing “profits” back into grants and support to the poorest countries, this potentially allows for structured economic growth in support of all the other developmental and humanitarian interventions. Does it get it right all the time – NO. Does it staff screw up sometimes – YES. Do it need more clarity around its real role and a prune back from “mission creep” – most certainly. I will comment on reform issues below.

The World Bank needs a CEO with political acumen – in short a PRESIDENT. Having had the experience of Jeff Sachs up close and four of the last five World Bank Presidents, Jeff Sachs is certainly NOT the right candidate. He just doesn’t get what the World Bank is and what its role is — he sees it in terms of a super USAID, a reinvention of HIID, or a competitor to UNDP. The discussion on HIID is entirely relevant along with his Millennium Villages. Jeff Sachs is an academic interested in Jeff Sachs’ search for the Nobel Prize in Economics or the Nobel Peace Prize or better still both. I always got the sense that he wonders what more he needs to do to get the accolades he thinks he deserves.

One candidate I have not seen mentioned is the former Managing Director Shengman Zhang who was acting President on a number of occasions under Wolfensohn and only left when driven out by Wolfowitz. As we has seen discussed in these pages and posts whilst the President of the US by convention makes the nomination, he could nominate a non-citizen — after all Wolfensohn was an Australian Citizen first and a naturalized American second. Shengman knows the Bank, was a very effective MD both inside and outside the Bank, now has Wall Street experience, and worked effectively with all the clients of the Bank as MD of all operations in the Bank.

To those who would seek to turn the Bank into a global USAID or charity or seek to shut it down, this would need major annual cash provided from OECD and middle-income companies in the order of $20-30bn a year to keep up the current lending volume as grants. Not-withstanding the likely increase in corruption such a volume of grants would bring, are you prepared for an increase in your taxes to pay for transfers to the World Bank?, or if it was shut down to the bilateral aid agencies to replace what the World Bank does now? I don’t think so. The Bank’s business model works, but there are flaws in the execution which needs to be addressed by any incoming President.

Several key changes are needed:
1. Most importantly the Bank needs clarity on its role and to work out what it should not do — what can effectively be left to bilaterals, other Development banks and charities in addition to the private sector
2. More external and community oversight of Bank projects is needed – each project could benefit from an advisory committee. This did happen at times but has
3. The Bank needs to continue to use technology to disseminate information faster and more completely.
4. Wolfensohn changed the hiring policy to favour younger staff – unfortunately too many came in with limited real world experience, but with a big dose of arrogance. A return to mid-career professional hiring is needed.
5. Also under Wolfensohn the focus became to hire graduates predominately out of US universities, and a limited number of them.

These last two changes have meant that a very limited view of economic growth and real-world experience has become the norm in the Bank. This must change.

A new PRESIDENT needs to strengthen and focus strategy and better align resources to become more effective, with improved external oversight — not just by the Board and the Governments the Executive Directors represent, but by the citizens affected by World Bank Projects, technical assistance and grants.